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Tata Power, BSES set to race for AES' Orissa pie

Anusha Subramanian & S Ravindran in Mumbai

Tata Power Company and BSES are set to lock horns over the 49 per cent stake held by the power transnational, AES Transpower, in Orissa Power Generation Corporation.

Following the US-based company's decision to exit India, both the domestic power majors have announced their interest in AES' stake.

AES had acquired OPGC for Rs 604 crore (Rs 6.04 billion), which was the largest acquisition in India till the mid-1990s. Industry sources say the valuation could be even more.

FA Vandrevala, managing director of Tata Power, said, "We are examining this option among many others and are conducting our own internal due diligence. A final decision will be taken only after this. At present, there is no management or board decision on this issue."

S S Dua, acting chairman and managing director of BSES, said, "We have shown an interest and will take a decision only after an internal due diligence."

The American multinational has said it plans to exit India following a spat with the Orissa government.

In the last two years a number of power multinationals such as the UK-based PowerGen and the US-based Cogentrix have decided to quit India.

If BSES succeeds in its plans to acquire 49 per cent in OPGC, it could prove critical to its success in Orissa.

The company has the distribution rights in three zones in the state. It has, however, been making losses.

Gaining control of the generation end of the power business in the state will help it bring down the costs. The company has also envisaged adding 9,000 mw of generating capacity in the next 10 years.

If Tata Power were to succeed it would be a kind of re-entry into the state. In early 1999, it had been awarded the fourth zone for distributing power.

It had turned it down saying that the transmission and distribution losses in this zone was far too high. The generation end of the business however presents a more attractive opportunity.

Tata Power's stated plan is to leverage its strength in the power sector and emerge as a key player in the communications business.

The exit of the power multinationals is owing to the poor financial health of the state electricity boards.

Developers were unwilling to go-ahead with projects since in the absence of a credible payment mechanism. The frequent flip-flops over by the government on policy matters has only made matters worse.

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